'Rampant abuse': Vocational loan scheme slammed as costs blow out

The federal government's troubled vocational loan scheme has blown out by a staggering 150 per cent over the past year to almost $2 billion as the number of students taking out taxpayer-funded loans doubled.

The HECS-style loans scheme for vocational students, VET FEE-HELP, has been blamed for encouraging dodgy private operators to enter the vocational education sector and rort the system by luring vulnerable students into their courses.

Former National Party minister Luke Hartsuyker could lose the seat of Cowper in a late challenge by the independent Rob Oakeshott. Photo: Alex Ellinghausen

A major Senate inquiry into private vocational education and training providers released on Thursday called for an immediate review of the scheme to address the "rampant abuse" and "accelerating costs" it uncovered. The government should cap the amount students can borrow and introduce minimum hours standards for courses, the Labor-Greens dominated committee found.

The cost of VET FEE-HELP loans soared from $699 million in 2013 to $1.76 billion in 2014, according to official data obtained by Fairfax Media. It is estimated that 40 per cent of these loans will never be repaid, meaning taxpayers will have to cover the cost of almost $1 billion in loans for the past 12 months alone.

The scheme, valued at $325 million in 2012, has grown five-fold over two years. The number of vocational providers billing taxpayers for their courses has grown from 105 to 224 over the same period, showing how lucrative the scheme has proven for private colleges.

Vocational Education and Skills Minister Luke Hartsuyker said he would consider introducing new regulations to stop the scheme blowing out further.

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"This is a concerning level of growth and I will be keeping a close eye on the scheme to ensure it is sustainable for taxpayers," he said.

Mr Hartsuyker introduced legislation on Thursday requiring students to have year 12 or equivalent qualifications to qualify for subsidies. Providers will also be banned from levying all fees in a single transaction, so students who drop out of a degree early are not saddled with large debts.

The number of students who accessed VET FEE-HELP loans leapt from 100,000 in 2013 to 202,800 last year - an increase of 103 per cent. Vocational students have taken out $3.1 billion in loans since Labor introduced the scheme in 2009.

The sector has been beset by scandals over recent months, leading the Australian Competition and Consumer Commission to investigate 10 training providers for misleading and unconscionable conduct.

The Phoenix Institute, which has received almost $10 million in VET FEE-HELP payments, this week suspended trading on the Australian Stock Exchange after the Education Department indicated it would remove its ability to charge the government for courses. The federal regulator also threatened its registration as an education provider.

Fairfax Media revealed last month the college had employed dozens of salesmen, many working door to door, who offered free laptops to vulnerable people, including drug addicts and those with intellectual disabilities, to sign them up for online diploma courses they would never complete.

Labor higher education spokesman Kim Carr said the government should move urgently to "clean out the sharks and shonks that are targeting vulnerable Australians, providing little or no training for over-priced courses and saddling those that can least afford it with debt".

"The committee heard that this is not just an issue of a few dodgy providers but one of widespread and systemic rorting," he said.

The committee also recommended the creation of an industry-funded ombudsman for the VET sector to reign in abuses.

In a dissenting report, Coalition senators said Labor designed the VET-FEE HELP scheme poorly and the government had introduced significant changes to restore public confidence in it.